As of January l, l98l, the mental health coverage provided by Blue Cross and Blue Shield for federal workers and their dependents (FEHBP) was significantly changed. The change in coverage as of January l981 was to increase the deductible for the high option plan from $l00 to $150 and from $200 to $250 for the low option plan (about 90% have the high option plan) combined with an increase in the coinsurance rate to 30% from 20% for the high option plan and from 25% to 35% for the low option plan. The focus of this research is to analyze the impact of this change in coverage on the utilization and cost of mental health services by federal employees covered by the Blue Cross/Blue Shield plan. Claims data from a sample of about l7,000 contracts between federal workers and the Blues matched with employment and income data from the Office of Personnel Management (OPM) will be used as the data base. Using a cohort approach comparisons of the utilization of mental health care will be made using measures such as rates of utilization of mental health services, their cost, and the number of mental health services that are used. A demand-for-mental-health model will be employed to analyze the factors that influence the use of mental health care and the amount of mental health care that is used. Financial variables to be included in the model are the price of mental health care (inpatient and outpatient), type of insurance coverage, and the income of the federal worker. Demographic variables will include age, sex, education, occupation and location. Area-wide data on the supply of mental health workers and medical care providers, especially primary care providers, will also be included. The demand model for mental health care will be developed by economists, sociologists, mental health providers and researchers. The multivariate models will be used to estimate the impact of the reduction of mental health benefits for various socioeconomic groups as well as by the type of mental health setting and type of mental health provider.